ALPHA TECHNOLOGIES GROUP INC - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED OCTOBER 26, 2003

COMMISSION FILE NUMBER 0-14365
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ALPHA TECHNOLOGIES GROUP, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 76-0079338
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

11990 SAN VICENTE BLVD., SUITE 350 90049
LOS ANGELES, CA (Zip Code)
(Address of principal executive offices)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(310) 566-4005
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SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:
NONE

SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
COMMON STOCK, $.03 PAR VALUE
(Title of each class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) had been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

Aggregate market value of the voting stock held by non-affiliates of the
registrant.

$5,499,202 at April 27, 2003

Number of shares outstanding of each of the issuer's classes of Common
Stock, as of the latest practicable date.

Common Stock, 7,110,336 shares outstanding at December 31, 2003.
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ALPHA TECHNOLOGIES GROUP, INC.

ANNUAL REPORT ON FORM 10K
FOR THE FISCAL YEAR ENDED OCTOBER 26, 2003

TABLE OF CONTENTS

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PART I

ITEM 1. BUSINESS.

OUR COMPANY

Alpha Technologies Group, Inc. ("Alpha" or the "Company") designs,
extrudes, fabricates and sells thermal management and non-thermal fabricated
products for use in a variety of industries including automotive,
telecommunication, industrial controls, transportation, power supply, factory
automation, consumer electronics, aerospace, defense and microprocessor
industries. The Company extrudes aluminum for its use in the production of
thermal management and non-thermal fabricated products and sells aluminum
extrusions to a variety of industries including the construction, sporting goods
and other leisure activity markets. Extruded aluminum is the primary raw
material in the production of thermal management and non-thermal fabricated
products.

The Company was incorporated as Synercom Technology, Inc., in Texas in
1969, and was reincorporated in Delaware in 1983. In April 1995, it changed its
name to Alpha Technologies Group, Inc. The Company's business is conducted
through its wholly-owned subsidiaries Wakefield Thermal Solutions, Inc.
("Wakefield") which includes the Wakefield-Pelham, Wakefield-Fall River and
Wakefield-Temecula divisions, Specialty Extrusion Corp. ("Specialty") and
Lockhart Industries, Inc. ("Lockhart").

In January 2001, the Company acquired National Northeast Corporation
("NNE"), which was engaged in the thermal management and aluminum extrusion
business in Pelham, New Hampshire. (See Footnote 2: Acquisitions). The Company
integrated NNE into its Wakefield subsidiary.

PRODUCTS

The Company designs, extrudes, fabricates and sells thermal management and
non-thermal fabricated products and aluminum extrusion products for use in a
variety of industries including automotive, telecommunication, industrial
controls, transportation, power supply, factory automation, consumer
electronics, aerospace, defense and microprocessor industries. The Company
extrudes aluminum for its use in the production of its products and sells
aluminum extrusions, standard shapes and custom profiles, to a variety of
industries including the construction, automotive, industrial platforms sporting
goods, and other leisure activity markets.

The Company's principal products include:

Extruded Heat Sinks Heat sinks and heat sink assemblies designed
for high power industrial applications,
including transportation equipment; automotive,
stereo amplifiers and others; bonded fin heat
sinks used by makers of power supplies,
transportation equipment and other industrial
equipment.

Active Cooling Components These products use air or liquid to dissipate
heat. Air-to-air heat exchangers use fans to
exchange heat with cooler air and are used in
high-performance telecommunications, military
and aerospace systems. These products also
include sophisticated precision formed
fin/fluxless vacuum brazed chassis, heat
exchangers and cold plates used to cool and
protect computer, radar and laser systems for
the aerospace, military and commercial markets.
Liquid cooling systems are used in applications
which require the removal of significantly
greater amounts of heat than can be achieved by
air cooling.

Penguin(TM) Coolers Heat sinks specifically designed to solve
thermal problems for the latest high-speed
microprocessors offered by major manufacturers.
These products are used in personal computers
and servers. Older versions of Penguin Coolers
are used in embedded microprocessor

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applications. In addition, these products solve
thermal problems for ASICs, ball grid arrays
("BGA") and multichip modules.

Stamped and Low Power Heat
Sinks Heat sinks designed to dissipate heat generated
by power semiconductors, transistors,
rectifiers, diodes and other electronic
components used in electronic applications.
Typically, these are smaller components used on
printed circuit boards.

Precision Compression Mounting
Clamp Systems These products are complete mounting clamp and
heat sink assembly systems for proper
installation, compression and cooling of
high-power compression pack (SCR)
silicon-controlled rectifiers. These products
are used in industrial welding, transportation
and motor control systems.

Accessory Products The Company's accessories include
high-performance thermal compounds, adhesives,
interface materials and other accessories.

Aluminum Extrusions The Company extrudes aluminum for its use in
the production of thermal management products
and sells aluminum extrusions to a variety of
industries including the construction, sporting
goods and other leisure activity markets.

Non Thermal Fabricated
Products The Company's non-thermal fabricated products
include a variety of items such as van racks,
steering wheel columns, recreational trailers,
louvers, dampers and fencing which are sold for
commercial, industrial, and residential use.

CUSTOMERS

The principal customers for the Company's products are leading original
equipment manufacturers ("OEM's") and contract manufacturers ("CM's") of
electronic equipment, including: Harman, IBM, Flextronics, Solectron, Rockwell
Automation, Lockheed Martin, General Electric, Delphi, SCI/Sanmina, Celestica
and Raytheon. The Company has approximately 1,600 customers. Harman
International Industries, Inc. accounted for 10.4%, 11.6% and 10.1% of its
revenues in fiscal years 2003, 2002 and 2001 respectively.

The Company's products must meet its OEM customer's exacting
specifications. Some of the Company's OEM customers require the Company to
qualify as an approved supplier. In order to so qualify, the Company must
satisfy stringent quality control standards and undergo extensive in-plant
inspections of its manufacturing processes, equipment and quality control
systems. In conformity with the above, the Company's Wakefield-Temecula division
is QS 9000 registered (a quality specification required by numerous automotive
customers) and the Company's Wakefield-Fall River and Wakefield-Pelham divisions
are ISO 9001-2000 registered (a quality standard required by numerous customers
from certain other industries).

SALES, MARKETING AND DISTRIBUTION

While the Company designs, manufactures and sells thermal management and
non-thermal fabricated products and aluminum extrusion products, it seeks to
become a strategic supplier to its customers and to differentiate itself from
its competitors by leveraging its ability to extrude, fabricate, and anodize
products under one umbrella. This vertical integration not only gives the
Company complete control over its processes, management believes that it also
gives the Company the shortest lead times and lowest cost structure of all
domestic suppliers.

The Company has applications engineers who are dedicated to providing
ongoing technical support to the Company's customers. These engineers provide
solutions to customers for their thermal management problems, answer customers'
questions regarding the use and application of the Company's products, provide
field support to customers and work with certain key customers to develop new
product solutions. The Company believes the technical services provided by its
engineers are an important factor in its product sales.

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The Company sells its products through its in-house sales personnel and a
network of independent manufacturers' representatives and distributors. In North
America, the Company's products sales are supported by a customer sales support
staff of 14 individuals, six factory direct key account managers, six
independent manufacturers' representatives and 13 distributors. In international
markets, the Company's thermal management products are sold by: five companies
functioning both as manufacturers' representatives and distributors, two
manufacturers' representatives and nine distributors.

In general, the Company's manufacturers' representatives and distributors
enter into agreements that allow for termination by either party upon 60 days
notice. Generally, distributors are permitted to return a small portion of
products purchased by them during the term of their agreement with the Company.
They are allowed to return all products other than obsolete, minimum buy and
custom products upon termination of the agreement. Historically, the amount of
returns has been insignificant to the Company's business. The Company's
distributors are generally not precluded from marketing competitive products.

RESEARCH AND PRODUCT DEVELOPMENT

The Company's product development strategy continues to focus on
engineering modifications of existing products to provide customers with higher
performance and lower cost products. The Company maintains technical
relationships with certain key customers in order to understand their future
thermal management requirements and focuses on developing new or modifying
existing products to meet such requirements. The Company strives to be included
on the recommended vendor list of its customers, however, such recommendation is
typically not exclusive.

During fiscal 2003, 2002 and 2001, the Company spent $396,000, $496,000,
and $926,000, respectively, on product research and development with respect to
its thermal management products. The Company believes that its technical
capabilities, in conjunction with its relationships with customers, will allow
it to continue to introduce solutions to new thermal management problems
responsively.

COMPETITION

The thermal management and non-thermal fabricated products and aluminum
extrusion products markets are highly competitive. There are many companies
which compete directly with the Company in these businesses and offer products
and services similar to those offered by the Company. In the thermal management
products market, the Company's principal competitor is Aavid Thermal
Technologies, Inc. In the non-thermal fabricated products and aluminum extrusion
markets, we compete with numerous small and large companies such as Alcoa Inc.
and RD Werner Company, Inc. We differentiate ourselves from our competitors by
leveraging our ability to extrude, fabricate, and anodize products within one
company.

BACKLOG

The Company's backlog was approximately $6.9 million and $7.5 million on
October 26, 2003 and October 27, 2002, respectively. Backlog consists of
purchase orders typically scheduled for shipment from two to eight weeks
following the order date. The Company's backlog at any time is not indicative of
the amount of future revenue to be recognized in any one period.

PROPRIETARY RIGHTS

The Company applies for patents with respect to its most significant
patentable developments. It owns 16 patents related to its thermal management
products, which expire from 2009 to 2019. Management believes that its
competitive position is not dependent on patents and that patent expirations
will not materially adversely affect the Company's competitive position.

RAW MATERIALS

The principal raw materials used in the Company's products are aluminum
billet and extrusions. The Company owns facilities and equipment which produce
the majority of the extruded aluminum it needs to

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manufacture its thermal management and non-thermal fabricated products. Raw
materials represent a significant portion of the cost of the Company's products.
Prices for raw materials are based upon market prices at the time of purchase.
Historically, the price of aluminum has experienced substantial volatility.
Because raw materials for an order are usually purchased within a short time
after an order is accepted and products are generally shipped within 60 days
following the order date, the Company does not believe the price volatility for
aluminum billet represents a significant risk. All raw materials are readily
available from multiple suppliers at competitive prices.

ENVIRONMENTAL REGULATIONS

Several aspects of the Company's operations utilize hazardous materials,
the removal of which is subject to government regulation. The Company contracts
with licensed third party waste companies to remove such hazardous materials.
While the Company believes that it conducts its operations in substantial
compliance with applicable environmental laws and regulations and has all
environmental permits necessary to conduct its business, more stringent
environmental regulations may be enacted in the future, and there can be no
assurance that the Company will not incur significant costs in the future in
complying with such regulations. Local environmental agencies monitor the
Company's operations for ongoing compliance with environmental requirements, and
the Company is required to correct any violations revealed by such monitoring.
The Company is not aware of any violations or events that would require the
Company to incur material cost, nor has the cost of complying with environmental
laws represented a material cost to the Company.

EMPLOYEES

At October 26, 2003, the Company employed 337 people of which 315 were full
time. Management believes that employee relations are excellent.

FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES

Financial information about export sales is set forth in Note 16 in the
Notes to Consolidated Financial Statements.

ITEM 2. PROPERTIES.

The Company has leased facilities at the following locations:

The Company's sales, engineering and administrative functions are located
in Pelham, New Hampshire. In addition, the Company has office space for some of
its corporate staff in Los Angeles, California. Management believes that its
facilities are in good condition and suitable for the purposes for which they
are used. The Company also has a lease on approximately 19,349 square feet of
unused office space in Beverly, Massachusetts which will expire in December 31,
2006. The Company has subleased this space and has accrued the difference
between its lease payments and expected sublease payments and other costs
related to this space. Leases expiring in 2004 are expected to be renewed. In
the unlikely event that any of these leases are not renewed, there is ample
alternative lease space available.

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ITEM 3. LEGAL PROCEEDINGS.

There are no material pending legal proceedings against the Company and, to
the Company's knowledge, no such proceedings are threatened.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.

PART II

ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.

MARKET FOR COMMON STOCK

The Company's Common Stock is traded on The Nasdaq Stock Market, National
Market System (NMS) under the symbol ATGI. Through the facilities of the
NASDAQ/NMS reporting system, actual sales prices of the Company's Common Stock
are available.

The following table sets forth the high and low sales prices of the
Company's Common Stock as reported on the NASDAQ National Market System for each
full quarterly period within the Company's two most recent fiscal years:

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth a description of our equity compensation
plans as of October 26, 2003:

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(1) All the warrants were approved by the Board of Directors but not approved by
the shareholders. Warrants to purchase an aggregate of 250,000 shares of the
Company's Common Stock were granted to the members of 33 Bridge Investors,
LLC as part a sale and leaseback transaction. Marshall Butler, a director

6

of the Company and a member of 33 Bridge Investors received 125,000 of such
warrants. Warrants to purchase an aggregate of 258,225 shares of the
Company's Common Stock were granted to the Company's Lenders pursuant to the
provisions of the First, Second and Seventh Amendments to the Credit
Agreements.

HOLDERS OF RECORD

On December 31, 2003, there were approximately 157 holders of record and
approximately 1,300 beneficial owners of the Company's Common Stock.

DIVIDENDS

The Company has paid no cash dividends on its Common Stock during fiscal
years 2003 and 2002. The Board of Directors of the Company does not intend to
authorize the payment of cash dividends to the Company's Common Stock holders in
the foreseeable future. Additionally, the Company's Amended Credit Agreement
does not permit the Company or its Subsidiaries to declare or pay cash
dividends.

SALES OF UNREGISTERED SECURITIES

On January 28, 2002, March 4, 2002, and September 5, 2003, the Company
issued warrants to purchase an aggregate of 36,666 shares at an exercise price
of $2.89 per share, an aggregate of 73,334 shares at an exercise price of $1.94
per share, and an aggregate of 148,225 shares at an exercise price of $1.62 per
share, respectively, of Common Stock of the Company to its Lenders in connection
with amendments to its Credit Agreement dated December 26, 2000. Neither the
warrants nor the underlying Common Stock have been registered under the
Securities Act of 1933 and transfer of the warrants and underlying shares are
subject to restrictions and limitations. The issuance of the warrants and
underlying shares was exempt from registration pursuant to Section 4(2) of the
Securities Act as a transaction not involving any public offering.

On October 1, 2002, the Company issued warrants to purchase an aggregate of
250,000 shares of Common Stock of the Company at an exercise price of $1.42 per
share to the members of 33 Bridge Investors LLC (including Marshall Butler, a
director and shareholder of the Company), in connection with the sale and
leaseback of the Company's Pelham, New Hampshire manufacturing facility. Neither
the warrants nor the underlying Common Stock have been registered under the
Securities Act of 1933 and transfer of the warrants and underlying shares are
subject to restrictions and limitations. The issuance of the warrants and
underlying shares was exempt from registration pursuant to Section 4(2) of the
Securities Act as a transaction not involving any public offering.

ITEM 6. SELECTED FINANCIAL DATA

In July 2000, the Company sold (the "Uni-Star Sale") its connector
business, Uni-Star Industries, Inc. ("Uni-Star") to Tyco Electronics Corporation
and Tyco Electronics UK Ltd. The sale resulted in a gain of $6,478,000, net of
taxes.

In November 2000, the Company sold its subsystems business (Malco
Technologies, Inc.) for $2,200,000 in cash and a three-year promissory note in
the amount of $300,000. The sale resulted in a gain of approximately $207,000,
net of taxes.

In January 2001, Alpha purchased all of the outstanding Common Stock of NNE
from Mestek, Inc. The purchase price was $49,900,000 in cash. The operating
results of NNE have been included in the Company's consolidated results of
operations since its acquisition date.

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The results of operations in the following Selected Financial Data have
been reclassified to present the results of businesses sold as discontinued
operations. As a result, income or loss from continuing operations does not
include any financial results associated with businesses sold. In the
consolidated financial statements for the Company which are included in this
document, these businesses are accounted for as discontinued operations.

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(1) See Consolidated Financial Statements and Notes to Consolidated Financial
Statements on pages F-1 through F-21

(2) See "Discontinued Operations" in Notes to Consolidated Financial Statements.

(3) Includes goodwill impairment charge of $13.0 and $15.6 million for the
fiscal years ended October 26, 2003 and October 27, 2002, respectively. (See
Note 20 "Goodwill and Long-Lived Assets" in Notes to Consolidated Financial
Statements.)

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL
CONDITION.

FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K may contain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements are based on current expectations, estimates and projections
about the Company's business based, in part, on assumptions made by management.
These statements are not guarantees of future performance and involve risks,
uncertainties and assumptions that are difficult to predict. Therefore, actual
outcomes and results may differ materially from what is expressed or forecasted
in such forward-looking statements due to numerous factors, including the
following: changes in demand for the Company's products, product mix, the timing
of customer orders and deliveries, the impact of competitive products and
pricing, excess or shortage of production capacity, compliance with covenants in
the Company's loan documents, ability to meet principal payments under those
loan documents and other risks discussed from time to time in the Company's
Securities and Exchange Commission filings and reports. In addition, such
statements could be affected by general industry and market conditions and
growth rates, and general domestic and international economic conditions. Such
forward looking statements speak

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only as of the date on which they are made, and the Company does not undertake
any obligation to update any forward-looking statement to reflect events or
circumstances which may take place after the date of this report.

CRITICAL ACCOUNTING POLICIES

The preparation of the Company's consolidated financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make judgements, estimates and assumptions in
certain circumstances that affect the amounts reported in the consolidated
financial statements and related footnotes. We regularly evaluate the accounting
policies and estimates we use to prepare our financial statements. Estimates are
used for, but not limited to, the accounting for allowance for doubtful accounts
and sales returns, inventory reserves, and contingencies. These estimates are
based on historical experience and various assumptions that we believe to be
reasonable under the particular applicable facts and circumstances. Actual
results could differ from those estimates.

We consider our critical accounting policies to be those that (1) involve
significant judgements and uncertainties, (2) require estimates that are more
difficult for management to determine and (3) have the potential to result in
materially different outcomes under varying assumptions and conditions. Our
critical accounting policies include the following: recognition of revenues,
provision for sales returns, provision for doubtful accounts, provision for
inventory reserves, impairment of long-lived assets, and accounting for income
taxes. These policies are more fully described in Note 1, "Significant
Accounting Policies" in the Notes to the Consolidated Financial Statements.

RESULTS OF OPERATIONS

The results of operations for fiscal 2001 and prior have been reclassified
to reflect the results of operations from Malco Technologies, Inc. as
discontinued operations. See introductory paragraphs in "Selected Financial
Data". Unless otherwise mentioned, the following discussion reflects results
from continuing operations, which includes the thermal management and
non-thermal fabricated products and aluminum extrusion products including the
operating results of NNE since acquisition and Alpha corporate expenses.

FISCAL YEAR 2003 VERSUS FISCAL YEAR 2002 COMPARISON

Net (Loss) Income. The Company reported a net loss for fiscal 2003 of
$15.6 million compared to a net loss of $11.5 million for fiscal 2002. The
Company recorded a $13.0 million and a $15.6 million goodwill impairment charge
in fiscal 2003 and fiscal 2002, respectively. The Company also incurred a
$323,000 intangible asset impairment charge in fiscal 2003 and a $2.1 million
loss on the sale of land and building in fiscal 2002. After excluding the above
mentioned items, the Company incurred a net loss of $2.3 million in fiscal 2003
compared to a net loss of $514,000 in fiscal 2002. The increased loss in fiscal
2003 was principally caused by decreased sales.

Sales. The Company's sales for fiscal year 2003 decreased by $8.8 million
to $46.8 million from $55.6 million for fiscal year 2002. Management believes
that this decrease was primarily due to reduced demand for the Company's
products resulting from the weakness in the economy, particularly in the
electronics, automotive and aluminum extrusion markets.

Gross Profit. The Company's gross profit margin for fiscal year 2003 was
10.9% of revenue compared to 14.8% of revenue for fiscal year 2002. The Company
implemented many cost cutting measures over the past year in an effort to
improve operating results such as tight expense controls and improved factory
efficiencies. Despite these improvements, gross profit decreased as a result of
proportionately higher fixed costs such as rent, depreciation and insurance
relative to total sales for the period.

Research and Development. Research and development expenses for fiscal
year 2003 were $396,000 compared to $496,000 for the same period last year. The
decrease was primarily due to lower labor costs and containment of expenses.

9

Selling, General and Administrative. Selling, general and administrative
expenses for fiscal 2003 were $5.8 million or 12.5% of sales as compared to $6.1
million or 11.0% of sales for fiscal 2002. SG&A expenses in absolute dollars
decreased by $280,000. This decrease was the result of decreases in commission
costs, amortization expense, compensation costs, legal fees and certain employee
benefit costs. Decreases in commission costs was due to decreased sales. The
decrease in amortization expense was due to the write-off of an intangible asset
which was determined to be impaired. Decreases in the other expense categories
were due to the Company's continued efforts to contain costs.

Impairment of Goodwill. The Company recorded a $13.0 million and a $15.6
million goodwill impairment charge in fiscal 2003 and fiscal 2002, respectively.
As a result of these charges, the Company no longer has any goodwill on its
books.

Impairment of Other Intangible Asset. The Company recorded a $323,000
impairment charge in fiscal 2003 related to an intangible asset related to a
non-compete agreement which management determined would no longer have any
value.

Interest Expense. Interest expense was $2,042,000 for fiscal 2003 compared
to $2,510,000 for fiscal 2002. This decrease was due to lower interest rates and
lower average outstanding borrowings.

Costs Associated with Debt Modifications. The Company recorded a $561,000
charge in fiscal 2002 resulting from amendments to Credit Agreements with its
Lenders which revised certain financial covenants and waived certain events of
non-compliance.

(Benefit) Provision for Income Tax. Benefit for income tax was $883,000
for fiscal 2003 compared to a benefit of $7.6 million for fiscal 2002. The
effective income tax rate for fiscal 2003 was 5.4% compared to 39.9% reported
for fiscal 2002. The Company evaluates the recoverability of its recorded
deferred tax assets each reporting period and provides valuation allowances
where necessary for assets not likely to be recovered. The Company increased its
valuation allowance by $5.6 million in fiscal 2003 as management determined it
would be unlikely that the Company will be able to realize the future tax
benefit associated with the current year's write-off of goodwill and other
intangible assets.

FISCAL YEAR 2002 VERSUS FISCAL YEAR 2001 COMPARISON

Net (Loss) Income. The Company reported a net loss for fiscal 2002 of
$11.5 million which includes the following items: goodwill impairment charge of
$15.6 million, a loss on the sale of land and building of $2.1 million, and
losses associated with debt modifications of $561,000. The loss reflects a
benefit for income taxes of $7.6 million. The loss before such benefit was $19.1
million. Net Income for fiscal 2001 of $305,000 included the following items: a
gain from the sale of the Company's subsystems business of $277,000, net of tax,
a loss from discontinued operations of $79,000, net of tax, and losses
associated with debt and modifications of $650,000.

Sales. The Company's sales for fiscal year 2002 decreased by 18.2% to
$55.6 million from $67.9 million for fiscal year 2001 (which includes NNE sales
from January 9, 2001, the date of acquisition). Although the Company does not
prepare separate financial statements for the business previously conducted as
NNE, management believes that sales declined in both the NNE business as well as
in its previously existing business. Management believes that this decrease was
due to reduced demand for the Company's products resulting from the weakness in
the economy, particularly in the telecom, networking, electronics and industrial
controls markets.

Gross Profit. The Company's gross profit for fiscal year 2002 was 14.8%
compared to 20.6% for fiscal year 2001. The Company implemented many cost
cutting measures over fiscal 2002 to improve operating results, including
employee layoffs, tight expense controls and improved factory efficiencies.
Despite these improvements, gross profit decreased as a result of revenues
decreasing by $12.3 million while fixed overhead costs such as depreciation,
lease expense and insurance remained relatively unchanged.

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Research and Development. Research and development expenses for fiscal
year 2002 were $496,000 compared to $926,000 for the same period last year. The
decrease was primarily due to the reduction in headcount and travel related
expenses.

Selling, General and Administrative. Selling, general and administrative
expenses for fiscal 2002 were $6.1 million or 11.0% of sales as compared to $9.0
million or 13.3% of sales for fiscal year 2001. SG&A expenses in absolute
dollars decreased by $2.9 million primarily due to decreases in goodwill
amortization, commission expense and compensation costs. Decreases in goodwill
amortization was the result of the Company's adoption of SFAS No. 142. Decreases
in commission expense is due to decreased sales. Decreases in compensation costs
is the direct result of headcount reductions.

Impairment of Goodwill. The Company recorded a $15.6 million goodwill
impairment charge in the third quarter of fiscal 2002. The Goodwill of the
Company is tested for impairment annually on June 1st and between annual tests
if an event occurs or circumstances change that could result in impairment.

Loss on Sale of Land and Building. The Company sold its Pelham, New
Hampshire manufacturing facility as part of a sale and leaseback transaction.
The sales price of the facility was $4,750,000. In connection with the sale and
leaseback transaction, the Company issued warrants to purchase an aggregate of
250,000 shares of Common Stock at an exercise price of $1.42 per share. The
warrants were valued at approximately $274,000 using the Black Scholes method.
The book value of the land, buildings and improvements was approximately $6.3
million. Selling costs were approximately $300,000, excluding the value of the
warrants. The loss on the sale of the property was $2.1 million ($1.3 million,
net of tax).

Costs Associated with Debt Modifications. The Company recorded charges of
$561,000 and $650,000 during fiscal 2002 and fiscal 2001, respectfully,
resulting from amendments to Credit Agreements with its Lenders which revised
certain financial covenants and waived certain events of non-compliance.

Interest and Other Income (net). Interest income was $30,000 for the
fiscal year 2002 compared to $201,000 for fiscal year 2001. The decrease in
income was due to lower interest income associated with lower cash balances on
hand during the period. The Company recorded other income(net)in fiscal 2001 of
$72,000 which was due primarily to the gain on the sale of certain equipment no
longer being used in the business.

(Benefit) Provision for Income Tax. Benefit for income tax was $7.6
million in fiscal year 2002 compared to an income tax provision of $165,000 for
fiscal year 2001. The effective income tax rate for fiscal year 2002 was 39.9%
compared to 60.7% for fiscal year 2001.

Gain on Sale of Discontinued Operation. Gain on sale of discontinued
operations was the result of the Company's sale of Malco Technologies Group,
Inc. in fiscal year 2001.

INCOME TAXES

On October 26, 2003, the Company had pre tax operating loss carry forwards
for both Federal and State of approximately $16,120,000 available to reduce
future taxable income , unused investment and research and development tax
credits of approximately $208,000 and $228,000 of alternative minimum tax
credits available to offset future Federal income taxes. The Federal net
operating loss carry forwards will expire from 2017 to 2021, the investment tax
credit and research and development tax credit carry forwards will expire from
2004 to 2006, and the alternative minimum tax credit has no expiration. The
state net operating loss carry forwards will expire from 2004 to 2007.

The Company currently carries deferred tax assets of approximately $10.0
million, net of valuation allowances of $6.1 million. The Company evaluates the
recoverability of its deferred tax assets each reporting period and provides
valuation allowances for assets not likely to be realized. Realization of these
assets is predicated on a return of the Company to sustained profitability and
the generation of sufficient taxable income to absorb these tax assets.
Effective in the third quarter of 2003, the Company began to provide valuation
allowances against newly generated loss carryforwards, as the Company's
operating history had led to a conclusion that these newly generated assets were
less likely of realization than those already recognized. In the event that the
Company's operations improve, the valuation allowances against these assets may
be

11

reversed, which would increase income. Conversely, in the event that the
Company's operations deteriorate, further valuation allowances against
previously recognized assets may be required.

LIQUIDITY AND CAPITAL RESOURCES

CREDIT FACILITIES

On January 9, 2001, the Company and its subsidiaries, as guarantors,
entered into a Credit Agreement (the "Credit Agreement") with several banks and
other financial institutions ("the Lenders"). Loans under the Credit Agreement
consist of a revolving credit facility and a term loan, and are secured by a
first lien on and the assignment of all of the Company's assets. Under the
Credit Agreement, the Company must meet certain covenants.

The Credit Agreement has been amended seven times to revise various
financial covenants, revise principal payment schedules and to waive certain
events of covenant non-compliance. The Company has paid various cash fees and
has issued warrants to purchase 258,225 shares of the Company's Common Stock to
the Lenders in connection with the amendments.

On September 5, 2003, the Company and its Lenders entered into a Seventh
Amendment to the Credit Agreement which revised the Maximum Leverage Ratio and
Fixed Charge Coverage Ratio for the balance of fiscal year 2003 and fiscal year
2004 to levels that management believes the Company will be able to achieve. The
Lenders waived the non-compliance with certain covenants at July 27, 2003, added
new Minimum EBITDA and Interest Coverage covenants for the remainder of fiscal
year 2003 and fiscal year 2004, revised the allowable amounts to be spent on
capital expenditures for fiscal years 2003 and 2004 and eliminated the Minimum
Net Worth requirement. At October 26, 2003, the Company was in compliance with
all covenants under the Credit Agreement. For periods ending on or after April
1, 2004, interest on the revolving credit facility and term loan will increase
by .5% at maximum financial leverage levels. Lastly, the September 5, 2003
amendment reduced the principal payments from $750,000 to $250,000 per quarter
for the remainder of fiscal year 2003 and from $1,500,000 to $250,000 per
quarter for fiscal year 2004. The maturity date of the revolver was extended
from June 2004 to January 2005. The term debt continues to mature on January
2006 at which time a final balloon payment of $11.0 million will be due.

Under the Amended Credit Agreement, the revolving credit facility accrues
interest on outstanding borrowings at LIBOR plus 3.5% (4.67% on October 26,
2003) and expires in January 2005. There is also an unused line fee equal to
..75% per annum. The Company may borrow up to the lesser of $5 million or 60% of
eligible accounts receivable ($3.3 million at October 26, 2003), as defined by
the Amended Credit Agreement. As of October 26, 2003, $3.2 million has been
drawn and is outstanding on the revolving credit facility.

The Amended Credit Agreement contains financial and other covenants with
which the Company must comply. These covenants include limitations on the amount
of financial leverage the Company can incur, minimum fixed charge coverage,
minimum interest coverage, limits on capital spending, and required levels of
EBITDA. The maximum financial leverage ratio, which is calculated by dividing
funded debt by rolling twelve month EBITDA, was waived for the third quarter of
fiscal 2003 and must not exceed: 11.0:1 for the fourth quarter of fiscal year
2003 through the second quarter of fiscal 2004; 10.3:1 for the third quarter of
fiscal 2004; 8.1:1 for the fourth quarter of 2004, and 1.75:1 for first quarter
of fiscal 2005 and thereafter. The fixed charge coverage ratio, which is
calculated by dividing EBITDA minus Capital Expenditures by fixed charges, was
waived for the remainder of fiscal year 2003. It must be no less than: 0.60:1
for the first quarter of fiscal 2004; 0.70:1 for the second and third quarters
of fiscal 2004; and 0.85:1 for the fourth quarter of fiscal 2004 and thereafter.
The interest coverage ratio, which is calculated by dividing EBITDA by interest
expense, must be no less than 0.70:1 for the fourth quarter of fiscal 2003;
1.00:1 for the first quarter of fiscal 2004; 1.20:1 for the second and third
quarters of fiscal 2004 and 1.50:1 for the fourth quarter of fiscal 2004.
Capital spending is limited to $450,000 for fiscal year 2003, $300,000 for
fiscal year 2004, and $1.0 million for fiscal year 2005 and each year
thereafter. Required levels of EBITDA are $350,000 for the fourth quarter of
fiscal 2003; $520,000 for the first quarter of fiscal 2004; $1,220,000 for the
second quarter year to date of fiscal 2004; $1,730,000 for the third quarter
year to date of fiscal 2004 and $2,620,000 for the entire 2004 fiscal year.
Additionally, the
12

Amended Credit Agreement does not permit the Company or its Subsidiaries to
declare or pay cash dividends. At October 26, 2003, the Company was in
compliance with all covenants under the Credit Agreement.

A portion of the outstanding term loan, $12.0 million on October 26, 2003,
is covered by an interest rate swap (the "hedged loan"). The hedged loan accrues
interest at a fixed rate of 8.47%. The balance of the term loan not covered by
the swap, $7.2 million on October 26, 2003, consists of a note which accrues
interest at the relevant LIBOR rate plus 3.5% (4.64% at October 26, 2003).

CASH FLOW INFORMATION

On October 26, 2003, the Company had cash of approximately $1,677,000
compared to $751,000 on October 27, 2002. For fiscal year 2003, $3,918,000 was
provided by operating activities of which $2,650,000 was used to pay down
$2,500,000 of long-term debt and $150,000 of bank fees related to the amendments
made to the Credit Agreements. For fiscal year 2002, $2,772,000 was provided by
operating activities and $4,490,000 was provided from investing activities as a
result of the net proceeds received from the sale and leaseback of its Pelham,
New Hampshire facility. Cash flows generated from operations and investing
activities in fiscal 2002 were used to pay down $8,750,000 of long-term debt and
$656,000 of bank fees related to the amendments made to the Credit Agreements.
The increase in cash provided from operating activities for fiscal 2003 compared
to fiscal 2002 was due primarily to lower accounts receivable and inventory
balances at October 26, 2003 compared to October 27, 2002. Capital purchases for
fiscal 2003 were $390,000 compared to $459,000 for fiscal 2002. Working Capital
was $9.5 million at both October 26, 2003 and October 27, 2002. The Company
believes that its available cash and anticipated future cash flow from
operations will be sufficient to fund operations over the next twelve months.

CONTRACTUAL OBLIGATIONS

The following table summarizes the Company's contractual obligations by
fiscal year:

RESULTS OF OPERATIONS

The Company's results of operations have been affected by the economic
downturn. In response to the reduction in revenue, the Company has taken a
number of steps to improve operational efficiency and profitability, including
reductions in head count at several of our facilities. These steps, coupled with
the changes to our credit facilities discussed above, should provide sufficient
liquidity to fund operations for at least the next twelve months.

SALE LEASEBACK WITH RELATED PARTY

On October 1, 2002, the Company's wholly-owned subsidiary, Wakefield
Thermal Solutions, Inc. ("Wakefield") entered into a sale and leaseback
transaction for its 171,235 square foot Pelham, New Hampshire manufacturing
facility (the "Property"). Wakefield sold the Property to 33 Bridge Investors,
LLC ("33 Bridge"), a newly-formed entity in which Marshall D. Butler, a director
of the Company owns 50% of the equity interest, for a purchase price of
$4,750,000. In connection with the sale and leaseback transaction, the Company
issued warrants to purchase an aggregate of 250,000 shares of Common Stock, par
value $.03 per share, of the Company to the members of 33 Bridge, including
warrants to purchase 125,000 shares of Common Stock to Marshall D. Butler, at an
exercise price of $1.42 per share. The warrants were valued at approximately
$274,000 using the Black Scholes method. The book value of the land, buildings
and improvements was approximately $6.3 million. Selling costs were
approximately $300,000, excluding the value of the warrants.

13

Effective on October 1, 2002, 33 Bridge and Wakefield entered into a lease
whereby Wakefield leased the Property from 33 Bridge for 15 years at an initial
rent of $630,000 per year with annual increases between 2% and 2.5% per annum.
Wakefield is responsible for operating expenses including taxes, utilities,
insurance and maintenance. As a result of the transaction the Company expects
annual expenses initially to increase by $325,000 representing the difference
between rental expense and interest and depreciation expense. The obligations of
Wakefield under the lease are guaranteed by the Company.

The purchase price and other terms of the sale and leaseback transaction
were the result of negotiations between representatives of the Company and
representatives of 33 Bridge. The terms of the transaction were approved by the
members of the Audit Committee of the Company constituted as a Special Committee
of Independent Directors.

The Company applied the net proceeds of the sale and leaseback transaction
to its $5,000,000 principal payment made on October 1, 2002 pursuant to its
Credit Agreement, dated December 26, 2000, as amended (the "Credit Agreement").

LEASE COMMITMENTS

The Company has operating lease commitments for certain office equipment
and manufacturing, administrative and support facilities. Minimum lease payments
under noncancellable leases, including amounts related to the sale leaseback
discussed above, are as follows:

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Under the Amended Credit Agreement, the revolving credit facility accrues
interest on outstanding borrowings at LIBOR plus 3.5% (4.67% on October 26,
2003) and expires in January 2005. There is also an unused line fee equal to
..75% per annum. The Company may borrow up to the lesser of $5 million or 60% of
eligible accounts receivable ($3.3 million at October 26, 2003), as defined by
the Amended Credit Agreement. As of October 26, 2003, $3.2 million has been
drawn and is outstanding on the revolving credit facility. At current borrowing
levels, a 1% increase in interest rates in our variable rate revolving credit
facility would increase annual interest expense by approximately $32,000.

A portion of the outstanding term loan ($12.0 million on October 26, 2003)
is covered by an interest rate swap (the "hedged loan"). The hedged loan accrues
interest at a fixed rate of 8.47%. The balance of the term loan not covered by
the swap, $7.2 million on October 26, 2003, consists of a note which accrues
interest at the relevant LIBOR rate plus 3.5% (4.64% at October 26, 2003). At
current borrowing levels, a 1% increase in interest rates in our variable rate
term debt would increase annual interest expense by approximately $72,000.

The Company, as required by the Amended Credit Agreement, utilizes an
interest rate swap (the "swap") to hedge against its interest rate risk. The
swap is designated as a cash flow hedge and is carried on the balance sheets at
fair value. The effective portion of unrealized gains or losses on the fair
value of the swap is charged to other comprehensive income until the hedged
transaction is complete and affects earnings. Ineffectiveness is charged to
earnings as incurred. The amount of ineffectiveness has not been material to
date.

14

The effect of the swap is to convert the interest rate on the hedged loan from a
variable rate as described above to a fixed rate of 8.47%. The swap matures on
March 31, 2004.

The principal raw material used in thermal management and non-thermal
fabricated products is aluminum. Raw materials represent a significant portion
of the cost of the Company's products. Prices for raw materials are based on
market prices at the time of purchase. Historically, the price of aluminum has
experienced substantial volatility. Although thermal management and non-thermal
fabricated products are generally shipped within 60 days following the order
date, increases in raw materials prices cannot always be reflected in product
sales prices. All raw materials are readily available from multiple suppliers at
competitive prices. The Company does not believe its risk in respect to raw
materials price volatility is significant since the raw materials for an order
are usually purchased within a short period of time after the order is accepted.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Financial statements and supplementary data required pursuant to this Item
are presented on pages F-1 through F-23 of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

Effective May 9, 2002, the Company engaged Deloitte & Touche LLP ("Deloitte
& Touche") as the independent auditors. The decision to change the Company's
independent auditors was recommended by the Audit Committee and approved by the
Board of Directors of the Company. The Company dismissed its previous certifying
accountant, Grant Thornton LLP ("Grant Thornton") effective May 9, 2002.

Grant Thornton's report on the Company's financial statements for the
fiscal years ended October 28, 2001 and October 29, 2000 were unqualified. There
were no disagreements with Grant Thornton on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure
during those fiscal years, and in the subsequent interim period through May 9,
2002, the date the relationship ended, which, if not resolved to Grant
Thornton's satisfaction, would have caused Grant Thornton to make reference to
the subject matter of the disagreement(s) in connection with its Report.

Prior to its engagement as the Company's independent auditors, Deloitte &
Touche had not been consulted by the Company either with respect to the
application of accounting principles to a specific transaction or the type of
audit opinion that might be rendered on the Company's financial statements.

ITEM 9A. CONTROLS AND PROCEDURES

At the end of the period covered by this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the Company's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-15(e). Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that the Company's disclosure
controls and procedures are effective. During the fourth quarter of 2003, there
were no changes in the Company's internal control over financial reporting that
have materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.

15

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The current members of the Board of Directors were most recently elected at
the 2003 Annual Meeting of Stockholders for a term of one year, and until their
successors are duly elected and qualified or until their earlier death,
resignation or removal. The members, their ages and certain other information
about each of them are set forth below.

The current executive officers of the Company are as follows:

Each officer of the Company holds office until his successor shall be duly
elected and qualified or until his earlier death, resignation or removal.

For information concerning Messrs. L. Butler and Streiter see above.

Mr. Chupik has been Vice President Administration of the Company since
August 1993; from May 1988, he was Vice President Human Resources of the
Company.

Mr. Polakiewicz has been Chief Financial Officer of the Company since
September 2001; from January 1995, he was Vice President of Finance for
Wakefield Thermal Solutions, Inc., a subsidiary of the Company.

17

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and holders of more than ten percent of a registered
class of the Company's equity securities, to file reports of ownership of such
securities with the Securities and Exchange Commission. Officers, directors and
greater than ten percent beneficial owners are required by applicable
regulations to furnish the Company with copies of all Section 16(a) forms they
file. Other than Lawrence Butler and Marshall Butler, the Company is not aware
of a beneficial owner of more than ten percent of its Common Stock.

Based on a review of the copies of Forms 3, 4 and 5 furnished to the
Company, the Company believes that all Section 16(a) filing requirements
applicable to its officers, directors and ten percent holders were complied
within a timely manner during fiscal year 2003.

CODE OF ETHICS FOR SENIOR EXECUTIVE AND FINANCIAL OFFICERS

The Company's Board of Directors has adopted a Code of Ethics for Senior
Executive and Financial Officers. A copy of the Code of Ethics is filed as
Exhibit 14 to this Annual Report on Form 10-K.

AUDIT COMMITTEE FINANCIAL EXPERT

The Company's Board of Directors has determined that Richard Gormley, a
director and a member of the audit committee, is an Audit Committee Financial
Expert. Mr. Gormley is independent as that term is used in Item 7(d)(3)(iv) of
Schedule 14A under the Exchange Act.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth the compensation paid or accrued for
services rendered in all capacities on behalf of the Company during the last
three fiscal years to the current executive officers who received compensation
in excess of $100,000 during the fiscal year ended October 26, 2003.

SUMMARY COMPENSATION TABLE

- ---------------

(1) Represents car allowance of $14,400 for fiscal 2003; represents car
allowance of $14,400 and 401(k) Employer Matching Contribution of $2,264 for
fiscal 2002; represents car allowance of $14,400 and 401(k) Employer
Matching Contribution of $3,150 for fiscal 2001.

18

(2) Represents car allowance of $8,200 for fiscal 2003; represents car allowance
of $7,200 and 401(k) Employer Matching Contribution of $5,500 for fiscal
2002; represents car allowance of $8,200 and 401(k) Employer Matching
Contribution of $4,688 for fiscal 2001.

(3) Represents accrued vacation payments.

(4) Represents car allowance of $7,200 and medical insurance waiver of $1,000
for fiscal 2003; represents car allowance of $7,200, medical insurance
waiver of $1,000 and 401(k) Employer Matching Contribution of $3,613 for
fiscal 2002; represents car allowance of $8,200, medical insurance waiver of
$1,200 and 401(k) Employer Matching Contribution of $3,820 for fiscal 2001.

(5) Represents 401(k) Employer Matching Contributions.

(6) Mr. Polakiewicz became Chief Financial Officer of the Company in September
2001. Amounts reflected in the table above for 2001 represent his
compensation for the entire fiscal year.

(7) Represents new options which were granted under the Company's Amended and
Restated 1994 Stock Option Plan in exchange for existing options
outstanding.

(8) Both Mr. Butler and Mr. Streiter took a voluntary salary reduction equal to
85% of their base salary for a portion of fiscal year 2002.

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information regarding grants of stock
options to the Named Executive Officers during the last fiscal year. No SARs
were granted by the Company during the last fiscal year. On February 28, 2003,
the Company offered to eligible employees, directors and consultants ("Eligible
Employees") the opportunity to exchange all their outstanding options to
purchase shares of Alpha common stock for new options to be granted under the
Company's Amended and Restated 1994 Stock Option Plan. All of the following
options granted represent new options which were granted in exchange for
existing outstanding options.

AGGREGATED OPTION EXERCISES IN FISCAL YEAR ENDED OCTOBER 26, 2003 AND FISCAL
YEAR END OPTION VALUES

The following table sets forth information regarding each exercise of stock
options during the fiscal year ended October 26, 2003 by the Named Executive
Officers and the fiscal year-end value of unexercised options held by such
persons. No Named Executive Officers exercised any options during the fiscal
year ended October 26, 2003.

- ---------------

(1) Fair market value at October 26, 2003 was less than exercise price.

19

EMPLOYMENT AGREEMENTS

Effective November 1, 2003, the Company entered into a three year
employment agreement with Lawrence Butler pursuant to which Mr. Butler is to
serve as Chief Executive Officer and Chairman of the Board of the Company. Under
the agreement, Mr. Butler is entitled to a base annual salary of $275,000. In
addition, the Agreement provides for an annual bonus based on the Company's
earnings from continuing operations before provision for income taxes. The
agreement provides that in the event of a change in control, Mr. Butler may
terminate the agreement.

Effective November 1, 2003, the Company entered into a three year
employment agreement with Robert C. Streiter pursuant to which Mr. Streiter is
to serve as President and Chief Operating Officer of the Company. Under the
agreement, Mr. Streiter is entitled to a base annual salary of $300,000. In
addition, the Agreement provides for an initial signing bonus of $100,000
payable during the first year of the term of the agreement and an annual bonus
based on the Company's earnings from continuing operations before provision for
income taxes. The agreement provides that in the event of a change in control,
Mr. Streiter may terminate the agreement.

Effective November 1, 2003, the Company entered into a three year
employment agreement with James Polakiewicz pursuant to which Mr. Polakiewicz is
to serve as Chief Financial Officer of the Company. Under the agreement, Mr.
Polakiewicz is entitled to a base annual salary of $145,000. In addition, the
Agreement provides for an initial signing bonus of $25,000 payable during the
first year of the term of the agreement and an annual bonus based on the
Company's earnings from continuing operations before provision for income taxes.

COMPENSATION OF DIRECTORS

During 2001, an amendment to the Company's 1994 Stock Option Plan was
approved by the Company's Board of Directors and Stockholders to provide for the
annual grant of options to purchase 5,000 shares of Alpha Technologies Group,
Inc. Common Stock to each non-employee director elected at the Annual Meeting of
Stockholders held in 2001 and 2002. During 2002, an amendment to the Company's
1994 Stock Option Plan was approved by the Company's Board of Directors and
Stockholders to provide for automatic grants of options to purchase 5,000 shares
Alpha Technologies Group, Inc. Common Stock to each non-employee director
elected at Annual Meetings of Stockholders held in 2003 and 2004. Such options,
which are not Incentive Stock Options, are exercisable at the fair market value
of Common Stock of the Company on the day of the Annual Meeting, vest one year
from the date of the grant and are exercisable until the date that is the
earlier of five years from the date of grant or 90 days after the Optionee
ceases to be a director of the Company.

The Company issued to Richard E. Gormley, options under the Company's 1994
Stock option Plan to purchase 25,000 shares of Common Stock of the Company at an
exercise price of $5.82 per share, the fair market value of a Common Share of
the Company on the date Mr. Gormley was elected as director at the 2001 Annual
Meeting. The options are exercisable in three equal installments on each of the
first three annual anniversary dates of the grant of the options.

On February 28, 2003, the Company offered to eligible employees, directors
and consultants ("Eligible Employees") the opportunity to exchange all their
outstanding options to purchase shares of Alpha common stock for new options to
be granted under the Company's Amended and Restated 1994 Stock Option Plan. The
number of shares subject to the new options to be granted to each Eligible
Employee was equal to the number of shares subject to the options tendered by
the Eligible Employee and accepted for exchange. The exercise price per share of
the new options was $1.78 which was the fair market value on the date of grant.
Each of the directors elected to exchange all their outstanding options and were
granted new options under the Company's Amended and Restated 1994 Stock Option
Plan.

In addition, directors who are not employees of or consultants to the
Company will be paid $1,000 for each meeting of the Board of Directors
physically attended and $1,000 for each committee meeting physically

20

attended. Directors who are officers of or consultants to the Company will not
receive any additional compensation for serving on the Board of Directors or its
committees.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board has a Compensation Committee, which currently consists of
Marshall D. Butler, Donald Grierson and Frederic A. Heim. For services to the
Company, Marshall Butler, formerly Chairman and Chief Executive Officer of the
Company, received compensation of $19,375 in fiscal year 2003.

On October 1, 2002, the Company's wholly-owned subsidiary, Wakefield
Thermal Solutions, Inc. ("Wakefield") entered into a sale and leaseback
transaction for its 171,235 square foot Pelham, New Hampshire manufacturing
facility (the "Property"). Wakefield sold the Property to 33 Bridge Investors,
LLC ("33 Bridge"), a newly-formed entity in which Marshall D. Butler, a director
of the Company owns 50% of the equity interest, for a purchase price of
$4,750,000. In connection with the sale and leaseback transaction, the Company
issued warrants to purchase an aggregate of 250,000 shares of Common Stock, par
value $.03 per share, to the members of 33 Bridge, including warrants to
purchase 125,000 shares of Common Stock to Marshall D. Butler, at an exercise
price of $1.42 per share. The warrants were valued at approximately $274,000
using the Black Scholes method. The book value of the land, buildings and
improvements was approximately $6.3 million. Selling costs were approximately
$300,000, excluding the value of the warrants. The loss on the sale of the
property was $2.1 million ($1.3 million, net of tax).

Effective on October 1, 2002, 33 Bridge and Wakefield entered into a lease
whereby Wakefield leased from 33 Bridge the Property for 15 years at an initial
rent of $630,000 per year with annual increases between 2% and 2.5% per annum.
Wakefield is responsible for operating expenses including taxes, utilities,
insurance and maintenance. As a result of the transaction the Company expects
annual expenses initially to increase by $325,000 representing the difference
between rental expense and interest and depreciation expense. The obligations of
Wakefield under the lease are guaranteed by the Company.

The purchase price and other terms of the sale and leaseback transaction
were the result of negotiations between representatives of the Company and
representatives of 33 Bridge. The terms of the transaction were approved by the
members of the Audit Committee of the Company constituted as a Special Committee
of Independent Directors. The Company applied the net proceeds to its $5,000,000
principal payment made on October 1, 2002 pursuant to its Credit Agreement,
dated December 26, 2000, as amended (the "Credit Agreement").

21

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth as of December 31, 2003, the number and
percentage of outstanding shares of Common Stock of the Company owned
beneficially, within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act"), by (i) each stockholder known by the
Company to own more than 5% of the outstanding shares of Common Stock; (ii) each
director of the Company; (iii) each named executive officer; and (iv) all
directors and executive officers, as a group. Except as otherwise specified, the
named beneficial owner has sole voting and investment power.

- ---------------

(1) Unless otherwise indicated, the address of each beneficial owner is c/o
Alpha Technologies Group, Inc., 11990 San Vicente Boulevard, Suite 350, Los
Angeles CA 90049.

(2) Includes shares deemed to be beneficially owned by such persons or entities
pursuant to Rule 13d-3 promulgated under the Exchange Act because they have
the right to acquire such shares within 60 days upon the exercise of
options or similar rights or because such persons or entities have or share
investment or voting power.

(3) Does not include shares owned by Dot.Com of which Mr. M. Butler and Mr.
Heim are each limited partners. Messrs. M. Butler and Heim disclaim
beneficial ownership of such shares.

(4) Includes 128,333 shares which Mr. M. Butler has the right to acquire upon
the exercise of stock options within 60 days, 125,000 shares which Mr.
Butler has the right to acquire upon the exercise of warrants related to a
sales and leaseback transaction and 470,184 shares owned by a trust of
which Mr. M. Butler is a trustee.

(5) Includes 695,038 shares owned by Dot.Com, 231,560 shares owned by trusts of
which Mr. L. Butler is trustee, 495,000 shares which Mr. L. Butler has the
right to acquire upon the exercise of stock options within 60 days and
35,520 shares held for Mr. L. Butler's account in the Company's 401(k)
Plan.

(6) Includes 40,000 shares which Mr. Grierson has the right to acquire upon the
exercise of stock options within 60 days.

(7) Includes 65,000 shares that Mr. Heim has the right to acquire upon exercise
of stock options within 60 days.

(8) Shares owned by Dot.Com are also included in the number of shares reported
as beneficially owned by Mr. L. Butler, the president and sole shareholder
of the general partner of Dot.Com.

(9) Includes 433,334 shares that Mr. Streiter has the right to acquire upon
exercise of stock options within 60 days, 14,900 shares owned by Mr.
Streiter's spouse as to which Mr. Streiter disclaims beneficial ownership
and 3,313 shares held for Mr. Streiter's account in the Company's 401(k)
Plan.

22

(10) Includes 63,601 shares that Mr. Chupik has the right to acquire within 60
days and 13,834 shares held for Mr. Chupik's account in the Company's
401(k) Plan.

(11) Includes 57,943 shares that Mr. Polakiewicz has the right to acquire upon
exercise of stock options within 60 days and 3,438 shares held for Mr.
Polakiewicz's account in the Company's 401(k) Plan.

(12) Dimensional Fund Advisors Inc. ownership as of September 30, 2003.

(13) Includes 1,309,878 shares which individuals in the group have the right to
acquire upon the exercise of stock options which are exercisable within 60
days, 56,105 shares held for the accounts of the individuals in the group
in the Company's 401(k) Plan, 695,038 shares held by Dot.Com, 231,560
shares owned by trusts of which Mr. L. Butler is trustee, and 470,184
shares owned by a trust of which Mr. M. Butler is a trustee.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

On October 1, 2002, the Company's wholly-owned subsidiary, Wakefield
Thermal Solutions, Inc. entered into a sale and leaseback transaction for its
171,235 square foot Pelham, New Hampshire manufacturing facility. Wakefield sold
the Property to 33 Bridge Investors, LLC ("33 Bridge"), a newly-formed entity in
which Marshall D. Butler, a director of the Company owns 50% of the equity
interest, for a purchase price of $4,750,000. In connection with the sale and
leaseback transaction, the Company issued warrants to purchase an aggregate of
250,000 shares of Common Stock, par value $.03 per share, of the Company to the
members of 33 Bridge, including warrants to purchase 125,000 shares of Common
Stock to Marshall D. Butler, at an exercise price of $1.42 per share. The
Company incurred rental expense of approximately $61,000 in October 2002 related
to this lease.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Aggregate fees for professional services rendered for the Company for the
fiscal years ended October 26, 2003 and October 27, 2002 were as follows:

The Audit fees for the fiscal years ended October 26, 2003 and October 27,
2002, respectively, were for professional services rendered for the audits of
the consolidated financial statements of the Company and statutory audits. Audit
related fees for the fiscal years ended October 26, 2003 and October 27, 2002,
respectively, were for the audits of the Company's employee benefit plans. Tax
fees for the fiscal years ended October 26, 2003 and October 27, 2002,
respectively, were for services related to federal and state tax compliance and
advice.

23

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a) The following documents are filed as part of this Annual Report on Form
10-K.

(1) Consolidated Financial Statements

(2) Financial Statement Schedules:

All schedules are omitted because they are not applicable or the required
information is shown in the consolidated financial statements or notes thereto.

(3) Exhibits:

The exhibits listed in the accompanying Index to Exhibits on are filed or
incorporated by reference as part of this Annual Report on Form 10-K.

(b) Reports on Form 8-K

The Company filed a report on September 9, 2003 in connection with the
release of its financial results for the third quarter and nine months ended
July 27, 2003.

24

ALPHA TECHNOLOGIES GROUP, INC.

INDEX TO EXHIBITS

EXHIBIT NO.

26

- ---------------

* Management Contract or Compensatory Plan

(1) Incorporated herein by reference to the Company's Form 8-K filed on January
23, 2001.

(2) Incorporated herein by reference to the Company's Form 8-K filed on August
14, 2000.

(3) Incorporated herein by reference to the Company's Form 8-K filed on
December 4, 2000.

(4) Incorporated herein by reference to the Registrant's Registration Statement
on Form S-1 (Reg. No. 33-2979), which became effective March 7, 1986.

(5) Incorporated herein by reference to the Registrant's Registration Statement
on Form S-8, filed September 28, 1987 (Reg. No. 33-17359).

(6) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended October 29, 2000 filed on January 31, 2001.

(7) Incorporated herein by reference to the Registrant's Registration Statement
on Form S-8, filed June 23, 1992 (Reg. No. 33-48663).

(8) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended October 27, 1996 filed on January 27, 1997.

(9) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended October 31, 1999 filed on January 31, 2000.

(10) Incorporated herein by reference to the Company's Form 10-Q for the
quarterly period ended April 30, 2000 filed on June 6, 2000.

(11) Incorporated herein by reference to the Registrant's Definitive Proxy
Statement for its 2002 Annual Meeting of Stockholders, dated April 10,
2002.

(12) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended October 28, 2001 filed on February 11, 2002.

(13) Incorporated herein by reference to the Company's Form 10-Q for the
quarterly period ended January 27, 2002 filed on March 13, 2002.

(14) Incorporated herein by reference to the Company's Form 10-Q for the
quarterly period ended July 28, 2002 filed on September 11, 2002.

(15) Incorporated herein by reference to the Company's Form 8-K filed on October
4, 2002.

(16) Incorporated herein by reference to the Company's Form 8-K/A filed on June
11, 2002.

(17) Incorporated herein by reference to the Company's Form 10-Q for the
quarterly period ended April 28, 2003 filed on June 11, 2003.

(18) Incorporated herein by reference to the Company's Form 10-Q for the
quarterly period ended July 28, 2003 filed on September 10, 2003.

(19) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended October 27, 2002 filed on February 11, 2003.

27

SIGNATURES

Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

ALPHA TECHNOLOGIES GROUP, INC.

By: /s/ LAWRENCE BUTLER
------------------------------------
(Lawrence Butler )
Chairman and Chief Executive Officer

Date: January 9, 2004

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

28

ALPHA TECHNOLOGIES GROUP, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

F-1

INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors of Alpha Technologies Group, Inc.:

We have audited the accompanying consolidated balance sheets of Alpha
Technologies Group, Inc. (a Delaware corporation) and subsidiaries as of October
26, 2003 and October 27, 2002, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Alpha Technologies Group, Inc.
and Subsidiaries as of October 26, 2003 and October 27, 2002, and the results of
their operations and their cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States of America.

As discussed in Note 20, in 2002 the Company adopted the provisions of SFAS
No. 142, "Goodwill and Other Intangible Assets."

/s/ Deloitte & Touche LLP

Boston, Massachusetts
January 9, 2004

F-2

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of Alpha Technologies Group, Inc.

We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Alpha Technologies Group, Inc. (a
Delaware corporation) and subsidiaries for the year ended October 28, 2001.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated results of operations and
consolidated cash flows of Alpha Technologies Group, Inc. and subsidiaries for
the year ended October 28, 2001, in conformity with accounting principles
generally accepted in the United States of America.

/s/ GRANT THORNTON LLP

Houston, Texas
December 14, 2001

F-3

ALPHA TECHNOLOGIES GROUP, INC.

CONSOLIDATED BALANCE SHEETS

See notes to the consolidated financial statements.

F-4

ALPHA TECHNOLOGIES GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

See notes to the consolidated financial statements.
F-5

ALPHA TECHNOLOGIES GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE (LOSS) INCOME
FOR THE YEARS ENDED OCTOBER 26, 2003, OCTOBER 27, 2002 AND OCTOBER 28, 2001

See notes to the consolidated financial statements.

F-6

ALPHA TECHNOLOGIES GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

See notes to the consolidated financial statements.
F-7

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

Alpha Technologies Group, Inc. ("Alpha" or the "Company") designs,
extrudes, fabricates and sells thermal management and non-thermal fabricated
products for use in a variety of industries including automotive,
telecommunication, industrial controls, transportation, power supply, factory
automation, consumer electronics, aerospace, defense and microprocessor
industries. The Company extrudes aluminum for its use in the production of
thermal management and non-thermal fabricated products and sells aluminum
extrusions to a variety of industries including the construction, sporting goods
and other leisure activity markets.

ACCOUNTING PERIODS

The Company follows a 4-5-4 week quarterly accounting period cycle wherein
each quarter consists of two four week months and one five week month. The last
day of the fiscal year is always the last Sunday in October.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Alpha and its
wholly-owned subsidiaries. All material intercompany transactions and balances
have been eliminated. As more fully described in Note 3 -- Discontinued
Operations, the financial statements reflect the subsystems business, which was
sold on November 17, 2000, as discontinued operations.

USE OF ESTIMATES AND OTHER UNCERTAINTIES

The preparation of the Company's consolidated financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.

REVENUE RECOGNITION AND ALLOWANCES FOR SALES RETURNS, DOUBTFUL ACCOUNTS AND
WARRANTIES

The Company recognizes revenues when (1) persuasive evidence of an
arrangement exists, (2) products and services have been delivered to the
ultimate customers, (3) the price is fixed or determinable, and (4)
collectibility is reasonably assured. The Company's shipping terms are generally
FOB shipping point.

Allowances for doubtful accounts are provided for account receivables
considered uncollectible. Reserve for sales returns are provided in the period
in which the related sale is recognized. The allowance for doubtful accounts and
sales returns is based on our assessment of the collectibility of specific
customer accounts, the aging of our accounts receivable and trends in product
returns. While we believe that our allowance for doubtful accounts and sales
returns is adequate and that the judgment applied is appropriate, if there is a
deterioration of a major customer's credit worthiness, actual defaults are
higher than our previous experience, or actual future returns do not reflect
historical trends, our estimates of the recoverability of the amounts due us and
our sales could be adversely affected.

The Company does not generally provide a warranty on the goods that it
sells. However, customers do have the right to return merchandise deemed
defective when received. These returns generally occur at the point of delivery
when the goods are subject to customer inspections. Reserves for these potential
returns are provided when the related sale is recognized. Claims for defective
goods have not been significant in any period presented.

F-8

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following is a roll forward of the allowances provided for doubtful
accounts and sales returns (including returns related to defective goods):

RISK MANAGEMENT AND HEDGING ACTIVITY

The Company's risk management strategies include the use of an interest
rate swap (see Note 7) to hedge against the impact on cash flows of changes in
interest rates. The interest rate swap is designated as a cash flow hedge of
specific variable rate debt and is carried on the balance sheets at fair value.
The Company evaluates its interest rate swap each quarter to determine if it is
effective. No other derivative instruments are held. The effective portion of
unrealized gains or losses on the fair value of the swap is charged to other
comprehensive income until the hedged transaction is complete and affects
earnings. Ineffectiveness is charged to earnings as incurred. Amounts related to
ineffectiveness have not been significant to date.

INVENTORIES AND INVENTORY RESERVES

Inventories are stated at the lower of cost or market and are priced using
the first-in, first-out method. Inventory purchases and commitments are based
upon future demand forecasts for our products and our current level of
inventory. Inventory reserves have been established for excess and obsolete
items. If there is a sudden and significant decrease in demand for our products
or there is a higher risk of inventory obsolescence because of rapidly changing
technology and requirements, we may be required to increase our inventory
reserve and as a result, our gross profit margin could be adversely affected.

The following is a roll forward of reserves provided for inventory:

PROPERTY AND EQUIPMENT

The cost of property and equipment is depreciated using the straight-line
method over the estimated useful lives of such assets, ranging from three to
fifteen years. Leasehold improvements are amortized on a straight-line basis
over the shorter of the lease term or the estimated useful lives of the leased
assets.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company assesses the recoverability of long-lived assets, including
intangible assets, held and used whenever events or changes in circumstances
indicate that future cash flows (undiscounted and without

F-9

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

interest charges) expected to be generated by an asset's disposition or use may
not be sufficient to support its carrying amount. If such undiscounted cash
flows are not sufficient to support the recorded value of assets, an impairment
loss is recognized to reduce the carrying value of long-lived assets to their
estimated fair value.

GOODWILL AND OTHER INTANGIBLE ASSETS

The Company records as goodwill the excess of purchase price over the fair
value of the identifiable net assets acquired. Statements of Financial
Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets,"
prescribe a two-step process for impairment testing of goodwill, which is
performed annually, as well as when an event triggering impairment may have
occurred. The first step tests for impairment, while the second step, if
necessary, measures the impairment. The Company has elected to perform its
annual analysis during the third quarter of each fiscal year as of June 1.

LOSS CONTINGENCIES

The Company is subject to the possibility of various loss contingencies
arising in the ordinary course of business. An estimated loss contingency is
accrued when it is probable that a liability has been incurred or an asset has
been impaired and the amount of loss can be reasonably estimated. We regularly
evaluate current information available to us to determine whether such accruals
should be adjusted.

COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) includes net income or loss, plus other
comprehensive income (loss). Other comprehensive loss in fiscal years 2003, 2002
and 2001 consists of fair value adjustments related to the interest rate swap
agreement, net of tax.

STOCK-BASED COMPENSATION

The Company employs the intrinsic value based method of accounting for
stock options. The intrinsic method measures compensation cost for stock options
as the excess, if any, of the quoted market price of the Company's stock at the
measurement date over the exercise price. Compensation related to awards to non-
employees is measured using the fair value method.

For fiscal 2003, 2002 and 2001, $9,000, $12,000 and $12,000, respectively,
was recognized as expense for options issued to non-employees under the
Company's stock option plans. The Company applies the intrinsic value method of
accounting for stock based compensation granted to employees and expects to
continue to do so, unless required to change by accounting principles generally
accepted in the United States. Pro forma information regarding net income and
earnings per share has been determined as if the Company has accounted for
options issued to employees under the fair value method of that statement. The
fair value of these options was estimated at the date of grant using the
Black-Scholes option pricing model. The weighted average assumptions for fiscal
2003 were: expected volatility 103.59%, risk free interest rate of 4.25%,
expected option life of 7.0 years and no expected dividends. The weighted
average assumptions for fiscal 2002 were: expected volatility 80.12%, risk free
interest rate of 3.98%, expected option life of 4.0 years and no expected
dividends. The weighted average assumptions used for fiscal 2001 were: expected
volatility 65.71%, risk free interest rate of 5.10%, expected option life of 4.0
years and no expected dividends. In addition, adjustments were made for
estimated cancellations.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimate, in

F-10

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

For pro forma disclosures, the estimated fair value of the options is
amortized to expense over the options' vesting period. If the fair value based
method of accounting for employee awards had been applied, the Company's net
income or loss and net income or loss per share would have been as follows:

The estimated weighted average fair value of options granted during fiscal
2003, 2002 and 2001 was $1.37, $2.48 and $4.10, respectively.

INCOME TAXES

The Company accounts for income taxes using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using current enacted
tax rates. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in the results of operations in the period that includes the
enactment date. The Company reassesses the recoverability of its deferred tax
assets by evaluating all available evidence and assessing whether it is more
likely than not that all or some portion of its recorded assets may not be
recoverable. To the extent that assets are not likely to be recovered, valuation
allowances are provided.

NEW ACCOUNTING PRONOUNCEMENTS

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity". SFAS
150 establishes standards on the classification and measurement of certain
financial instruments with characteristics of both liabilities and equity. The
provisions of SFAS 150 are effective for financial instruments entered into or
modified after May 31, 2003 and to all other instruments that exist as of the
beginning of the first interim financial reporting period beginning after June
15, 2003. The adoption of SFAS 150 did not have a material impact on our results
of operations or financial position.

In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities". FIN 46 requires that if an entity
has a controlling financial interest in a variable interest entity, the assets,
liabilities and results of activities of the variable interest entity should be
included in the consolidated financial statements of the entity. FIN 46 is
effective immediately for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or acquired prior
to

F-11

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

February 1, 2003, the provisions of FIN 46 must be applied for the first interim
or annual period beginning after December 15, 2003. We do not believe that the
adoption of FIN 46 will have a material impact on our results of operations or
financial position.

2. ACQUISITIONS

On January 9, 2001, the Company purchased all of the outstanding common
stock of National Northeast Corporation ("NNE") from Mestek, Inc.(the "Seller").
The purchase price was $49,900,000 in cash. Pursuant to the agreement, the
Seller and certain of its affiliates agreed not to engage in the manufacture and
sale of aluminum extrusions and aluminum heat sinks for four and one half years.
The Company used $14,800,000 of its cash on hand and $39,800,000 in borrowings
under its credit facility to pay the purchase price and $1,300,000 in
transaction costs and costs for the credit facility and to satisfy $3,400,000 in
outstanding debt under its old credit facilities, including a $378,000 early
termination fee. The acquisition has been accounted for as a purchase
transaction, and accordingly, the purchase price has been allocated to the
assets acquired and liabilities assumed for the acquisition based upon their
estimated fair values. The Company initially elected to amortize the portion of
the purchase price allocated to goodwill over 20 years. Amortization ceased upon
adoption of SFAS No. 142. The operating results of NNE have been included in the
Company's consolidated results of operations since its acquisition date.

3. DISCONTINUED OPERATIONS

On November 17, 2000, Malco Technologies Group, Inc., a wholly-owned
subsidiary of Alpha, sold substantially all of the assets and the subsystems
business (the "Business") located in Colmar, Pennsylvania, to a privately owned
company (the "Buyer"). The sale included Malco's accounts receivable, inventory,
machinery, equipment, tools, business machines, office furniture and fixtures
and certain intangibles including but not limited to customer lists, trade names
and engineering designs and the agreement by Alpha and certain of their
affiliates not to engage in any business, directly or indirectly, that competes
with Malco for three years. Alpha received $2,200,000 in cash plus a three-year,
12% note for $300,000 and Buyer assumed certain payables and liabilities of the
Business. The sale resulted in a gain of $277,000, net of income tax expense of
$70,000.

4. INVENTORIES

Inventories consisted of the following on:

F-12

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following on:

6. ACCRUED COMPENSATION AND RELATED BENEFITS

Accrued compensation and related benefits consisted of the following on:

7. DEBT AND REVOLVING CREDIT FACILITIES

Revolving Credit Facilities and Term Debt consisted of the following on:

On January 9, 2001, the Company and its subsidiaries, as guarantors,
entered into a Credit Agreement (the "Credit Agreement") with several banks and
other financial institutions ("the Lenders"). The Credit Agreement consists of a
revolving credit facility which expires in January 2005 and a term loan which
matures in January 2006. Borrowings under the Credit Agreement are secured by a
first lien on and the assignment of all of the Company's assets. The Credit
Agreement has been amended seven times. Under the Credit Agreement, the Company
must meet certain covenants. The Company was not in compliance with certain
financial covenants contained in the Amended Credit Agreement for the quarter
ended July 27, 2003. The Credit Amendment was amended on September 5, 2003 to
revise the Maximum Leverage Ratio and Fixed Charge Coverage Ratio for the
balance of the fiscal year 2003 and fiscal year 2004 to levels that management

F-13

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

believes the Company will be able to achieve. The Lenders waived the events of
non-compliance with certain covenants at July 27, 2003. In addition, the
September 5, 2003 amendment added new Minimum EBITDA and Interest Coverage
covenants for the remainder of fiscal year 2003 and fiscal year 2004, revised
the allowable amounts to be spent on capital expenditures for fiscal years 2003
and 2004 and eliminated the Minimum Net Worth requirement. For periods ending on
or after April 1, 2004, interest on the revolving credit facility and term loan
will increase by .5% at maximum financial leverage levels. Lastly, the September
5, 2003 amendment reduced the principal payments from $750,000 to $250,00 per
quarter for the remainder of fiscal year 2003 and from $1,500,000 to $250,000
per quarter for fiscal year 2004. The expiration date of the revolver was
extended from June 2004 to January 2005. The term debt continues to mature on
January 2006 at which time a final balloon payment of $11.0 million will be due.
Fees for the Fifth and Sixth Amendment and waiver were approximately $52,000 and
$38,000, respectively. Fees for the Seventh Amendment and waiver, including the
fair value of warrants to purchase the Company's Common stock issued to the
lenders, totaled approximately $220,000.

Under the Amended Credit Agreement, the revolving credit facility accrues
interest on outstanding borrowings at LIBOR plus 3.5% (4.67% on October 26,
2003) and expires on January 2005. There is also an unused line fee equal to
..75% per annum. The Company may borrow up to the lesser of $5 million or 60% of
eligible accounts receivable ($3.3 million at October 26, 2003), as defined by
the Amended Credit Agreement. Prior to the amendments, the Company was allowed
to borrow up to $15 million. As of October 26, 2003, $3.2 million has been drawn
and is outstanding on the revolving credit facility. A portion of the
outstanding term loan ($12.0 million on October 26, 2003) is covered by an
interest rate swap (the "hedged loan"). The hedged loan effectively accrues
interest at a fixed rate of 8.47%. The balance of the term loan not covered by
the swap, $7.2 million on October 26, 2003, consists of a note which accrues
interest at the relevant LIBOR rate plus 3.5% (4.64% at October 26, 2003). Term
loans require quarterly principal payments through January 2006.

The Company, as required by the Amended Credit Agreement, utilizes an
interest rate swap (the "swap") to hedge against the impact on cash flows of
changes in interest rates. The interest rate swap is designated as a cash flow
hedge of a specific portion of the term loans outstanding under the Credit
Facility and is carried on the balance sheets at fair value. The effective
portion of unrealized gains or losses on the fair value of the swap is charged
to other comprehensive income, net of applicable taxes, until the hedged
transaction is complete and affects earnings. Ineffectiveness is charged to
earnings as incurred. Amounts related to ineffectiveness have not been
significant to date. The effect of the swap is to convert the interest rate on
the hedged portion of the term loans from a variable rate to a fixed rate of
8.47%. The swap matures on March 31, 2004. The carrying value and fair value of
the swap was a liability of $129,000 and $477,000 at October 26, 2003 and
October 27, 2002, respectively. The swap liability is included in accrued
expenses. During 2003, changes in the value of the swap reduced interest expense
by $348,000. The remaining carrying value of the swap will reduce interest
expense in 2004.

Future minimum principal payments on the revolving credit facilities and
the term loans are as follows:

Cash paid for interest on all outstanding debt aggregated $1,606,000,
$2,281,000 and $2,338,000 for the years ended October 26, 2003, October 27, 2002
and October 28, 2001, respectively. The Company's Amended Credit Agreement does
not permit the Company or its Subsidiaries to declare or pay cash dividends.

F-14

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. PREFERRED STOCK

On October 26, 2003 and October 27, 2002, the Company had authorized
180,000 shares of unissued, preferred stock with a par value of $100 per share.
The Board of Directors has the authority to issue such preferred stock and to
set the terms thereof, including the dividend rate, conversion rights,
redemption rights, voting rights and liquidation preferences. There are no
shares of preferred stock outstanding as of October 26, 2003.

9. REPURCHASE OF COMMON STOCK

In October 1999, the Board of Directors of the Company approved a plan to
purchase up to $500,000 of the Company's common stock in the open market.
Pursuant to the stock repurchase plan, the Company purchased 25,137 shares of
common stock at an aggregate price of $90,000 during fiscal year 2001.

10. STOCK OPTION PLANS

The Company has in effect nonqualified and incentive stock option plans
under which shares are available for exercise. As of October 26, 2003, the Board
of Directors has reserved 1,954,527 shares of common stock for issuance under
the plans. The prices at which substantially all stock options outstanding have
been granted have been equal to or in excess of the fair market value of the
Company's stock at the time of the grant. These options vest over periods up to
three years. On October 26, 2003, there were 368,319 shares available for future
grants.

The following table summarizes activity and outstanding options under the
plans:

F-15

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On February 28, 2003, the Company offered to eligible employees, directors
and consultants ( "Eligible Employees") the opportunity to exchange all their
outstanding options to purchase shares of Alpha Common stock for new options
which were to be granted under the Company's Amended and Restated 1994 Stock
Option Plan. The number of shares subject to the new options to be granted to
each Eligible Employee was equal to the number of shares subject to the options
tendered by the Eligible Employee and accepted for exchange. Eligible Employees
tendered options to purchase 1,575,708 shares. The exercise price per share
($1.78) of the new options was 100% of the fair market value on the date of
grant, October 8, 2003, which was at least six months and one day after the date
the Company cancelled the options accepted for exchange.

In April, 2002, the Company's Board of Directors and stockholders approved
an amendment to the 1994 Stock Option Plan, which provided for options to
purchase 5,000 shares to be automatically granted to non-employee directors at
the Annual Meetings to be held in 2003 and 2004. In November, 2001, the
Company's Board of Directors approved an amendment to the 1994 Stock Option Plan
to increase the aggregate number of shares subject to the Plan to 2,400,000
shares, subject to shareholder approval which was subsequently obtained at the
2002 Annual Meeting of Stockholders. In April, 2001, the Company's Board of
Directors and stockholders approved an amendment to the 1994 Stock Option Plan,
which provided for options to purchase 5,000 shares to be automatically granted
to non-employee directors at the Annual Meetings to be held in 2001 and 2002 and
set the maximum number of shares as to which options may be granted to any one
individual under the Plan during any calendar year at 250,000.

11. WARRANTS

On January 28, 2002, March 4, 2002, and September 5, 2003, the Company
issued warrants to purchase an aggregate of 36,666 shares at an exercise price
of $2.89 per share, an aggregate of 73,334 shares at an exercise price of $1.94
per share, and an aggregate of 148,225 shares at an exercise price of $1.62 per
share, respectively, of common stock of the Company to its Lenders in connection
with amendments to its Credit Agreement dated December 26, 2000. These warrants
were fully vested and exercisable at the date of issuance and will expire in
five years from the date of grant. None of these warrants have been exercised as
of October 26, 2003. The value of the warrants (determined using the
Black-Scholes pricing model) was $306,000 and is being amortized to interest
expense over the remaining life of the loan.

On October 1, 2002, warrants to purchase 250,000 shares of the Company's
Common stock were issued to 33 Bridge Investors, LLC. in connection with the
sale and leaseback transaction as described in Note 18. The warrants were fully
vested and exercisable at the date of issuance at an exercise price of $1.42 per
share and will expire in ten years. None of these warrants have been exercised
as of October 26, 2003. The fair value of the warrants (determined using the
Black-Scholes pricing model) was $274,000 and was expensed as a component of the
loss on the sale of land and building.

12. NET INCOME (LOSS) PER SHARE

Basic net income (loss) per common share is computed by dividing income
(loss) available to common shareholders by the weighted average number of shares
of Common stock outstanding during each year.

F-16

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Diluted earnings per common share are calculated to give effect to stock options
and warrants outstanding during the period. The treasury stock method is used to
calculate dilutive shares and reduces the gross number of dilutive shares by the
number of shares purchasable from the proceeds of the options assumed to be
exercised. For fiscal year 2003 and 2002, potentially dilutive shares were not
considered in the computation as their effect would have been antidilutive. The
amounts used in calculating basic and dilutive earnings per share and the
amounts that would have been used in fiscal 2001 through 2003 were:

- ---------------

(1) Antidilutive

For fiscal year ended October 26, 2003 and October 27, 2002, 7,342 and
47,266 potential common shares, respectively, were excluded from the
calculations above because the effect was antidilutive.

13. INCOME TAXES

The (benefit) provision for income taxes for continuing operations was as
follows:

F-17

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The differences in the income taxes provided for the amounts determined by
applying the Federal statutary rate to income before taxes of the Company are
summarized as follows:

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities and their changes during the
year end ended October 26, 2003 were as follows:

Cash paid for income taxes aggregated $90,000, $136,000 and $300,000 for
the years ended October 26, 2003, October 27, 2002 and October 28, 2001,
respectively.

The Company evaluates the recoverability of its recorded deferred tax
assets each reporting period and provides valuation allowances where necessary
for assets not likely to be recovered. The Company increased its valuation
allowance to $6,143,000 from $500,000 at October 27, 2002, as management
determined it would be unlikely that the Company will be able to realize the
future tax benefit associated with the current year's write-off of goodwill and
other intangible assets. In fiscal 2001, the valuation allowance decreased by
$454,000.

As of October 26, 2003, the Company had pre tax operating loss carry
forwards for both Federal and State of approximately $16,120,000 ($6,383,000,
net of tax), unused investment and research and development tax credits of
approximately $208,000 and $228,000 of alternative minimum tax credits available
to offset future Federal income taxes. The Federal net operating loss carry
forwards will expire from 2017 to 2021, the investment tax credit and research
and development tax credit carry forwards will expire from 2004 to 2006, and the
alternative minimum tax credit has no expiration. The state net operating loss
carry forwards will expire from 2004 to 2007.

F-18

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. COMMITMENTS AND CONTINGENCIES

COMMITMENTS

The Company has operating lease commitments for certain office equipment
and manufacturing, administrative and support facilities. Minimum lease payments
under noncancellable leases, including amounts related to the sale leaseback
discussed in Note 18, are as follows:

Rent expense (exclusive of operating expenses and net of sublease rents)
for operating leases for continuing operations was approximately $1,918,000,
$1,337,000 and $1,416,000 in fiscal 2003, 2002, and 2001, respectively. Total
rent expense was approximately $2,019,000, $1,422,000 and $1,501,000 in fiscal
2003, 2002 and 2001, respectively.

CONTINGENCIES

From time to time, the Company becomes involved in litigation incidental to
its business. Management, based on its understanding of the facts and, where
necessary advice of counsel, does not believe that matters currently pending,
either individually or in the aggregate, would have a material impact on
financial position or the results of operations.

15. RETIREMENT PLANS

The Company sponsors a defined contribution plan which is available to all
domestic employees. This plan provides for employer contributions based on
employee participation. The total expense from continuing operations under the
plan was $292,000 and $346,000 for the years ended October 27, 2002 and October
28, 2001, respectively. Employer contributions were suspended for the entire
2003 fiscal year.

16. BUSINESS SEGMENT INFORMATION

The Company has one operating segment, which manufactures thermal
management and non-thermal fabricated products and aluminum extrusions. The
Company derives substantially all of its operating revenue from the sale and
support of one group of products and services with similar characteristics such
as the nature of the production processes, the type and class of customers, and
the methods of distribution. Substantially all of the Company's assets are
located within the United States. In addition, the Company's chief decision-
maker and management make decisions based on one product group.

F-19

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Net sales to one customer totaled approximately 10.4%, 11.6% and 10.1% of
consolidated revenues for the fiscal years ended October 26, 2003, October 27,
2002 and October 28, 2001, respectively.

17. RESTRUCTURING COSTS

In response to the decline in demand for the Company's products resulting
from the economic downturn in the markets served by the Company's products, the
Company took significant actions to reduce operating expenses and incurred
restructuring costs totaling $822,000 in fiscal 2001. Such restructuring costs
consisted of severance costs ($257,000) and a non-cancelable lease commitment on
an unused administrative facility ($565,000). The following summarizes the
changes in the restructuring cost liability since the date the charge was taken
in 2001.

18. SALE AND LEASEBACK TRANSACTION WITH RELATED PARTIES

On October 1, 2002, the Company's wholly-owned subsidiary, Wakefield
Thermal Solutions, Inc. ("Wakefield") entered into a sale and leaseback
transaction for its 171,235 square foot Pelham, New Hampshire manufacturing
facility (the "Property"). Wakefield sold the Property to 33 Bridge Investors,
LLC ("33 Bridge"), a newly-formed entity in which Marshall D. Butler, a director
of the Company owns 50% of the equity interest, for a purchase price of
$4,750,000. In connection with the sale and leaseback transaction, the Company
issued warrants to purchase an aggregate of 250,000 shares of Common Stock, par
value $.03 per share, to the members of 33 Bridge, including warrants to
purchase 125,000 shares of Common stock to Marshall D. Butler, at an exercise
price of $1.42 per share. The warrants were valued at approximately $274,000
using the Black Scholes method. The book value of the land, buildings and
improvements was approximately $6.3 million. Selling costs were approximately
$300,000, excluding the value of the warrants. The loss on the sale of the
property was $2.1 million ($1.3 million, net of tax).

Effective on October 1, 2002, 33 Bridge and Wakefield entered into a lease
whereby Wakefield leased from 33 Bridge the Property for 15 years at an initial
rent of $630,000 per year with annual increases between 2% and 2.5% per annum.
Wakefield is responsible for operating expenses including taxes, utilities,
insurance

F-20

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and maintenance. The obligations of Wakefield under the lease are guaranteed by
the Company. The Company incurred rental expense of approximately $61,000 in
October 2002 related to this lease. Rental expense in fiscal year 2003 for this
lease was approximately $629,000.

The purchase price and other terms of the sale and leaseback transaction
were the result of arm's length negotiations between representatives of the
Company and representatives of 33 Bridge. The terms of the transaction were
approved by the members of the Audit Committee of the Company constituted as a
Special Committee of Independent Directors. The Company applied the net proceeds
to a $5,000,000 principal payment made on October 1, 2002 pursuant to its Credit
Agreement, dated December 26, 2000, as amended (the "Credit Agreement").

19. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's principal financial instruments consist of cash and cash
equivalents, variable rate debt outstanding under the Company's Credit
Agreement, and the interest rate swap utilized as a cash flow hedge. The
carrying amounts for these financial instruments approximate their estimated
fair values.

The fair market values of financial instruments were estimates based on
market conditions and perceived risks at October 26, 2003 and October 27, 2002,
and require varying degrees of management judgment. The factors used to estimate
these values may not be valid on any subsequent date. Accordingly, the fair
market values of the financial instruments presented may not be indicative of
their future values.

The following methods and assumptions were used to estimate the fair market
value of each class of financial instrument:

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash in banks and money market accounts
as well as highly liquid investments with initial maturities of three months or
less when purchased. The carrying amount approximated fair market value due to
the short-term maturity of the instruments.

VARIABLE-RATE REVOLVING CREDIT FACILITY AND TERM NOTES

The carrying amount of the credit facility approximates fair market value
because of the renewing feature of the facility. The fair market value of the
notes is estimated based on quoted market prices.

INTEREST RATE SWAP AGREEMENT

The Company, as required by the Amended Credit Agreement utilizes the swap
to hedge against its interest rate risk. The fair market value represents the
amount Alpha would receive or pay to terminate the agreement taking into
consideration current interest rates.

20. GOODWILL AND OTHER INTANGIBLE ASSETS

An independent valuation advisory firm was engaged to assist the Company
with its annual impairment test as of the designated test date of June 1. These
tests concluded that $13.0 million and $15.6 million of the goodwill carried on
the books as of June 1, 2003 and June 1, 2002, respectively, was impaired. The
fair value of the Company's single reporting unit was determined by using
established valuation techniques, specifically, the income, market and cost
approaches. Management believes that this impairment was caused by the downturn
in the economy which severely impacted the markets served by the Company's
products. This impairment has been reported as a separate component of operating
expenses in the Consolidated Statement of Operations. Goodwill, net of
amortization, has been reduced from $28.6 million at October 28, 2001 to $13.0
million at October 27, 2002 and from $13.0 million to $0 at October 26, 2003.

F-21

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following reconciliation summarizes the impact that the adoption of
SFAS No. 142 had on the Company's net (loss) income and earnings per share.

The Company performs impairment analyses of its long-lived assets whenever
events and circumstances indicate that they may be impaired. All long-lived
assets other than goodwill are assessed for impairment by comparison of the
total amount of undiscounted cash flows expected to be generated by such assets
to their carrying value. In July 2003 it was determined that a an intangible
asset related to a non compete agreement between the Company and a former owner
of Lockhart Industries, Inc., which is now a subsidiary of Alpha Technologies
Group, Inc., no longer had any value. The carrying value of this asset before
the impairment write-off was $323,000. This impairment has been reported as a
separate component of operating expenses in the Consolidated Statement of
Operations

F-22

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

21. SUMMARY OF QUARTERLY RESULTS OF OPERATIONS

F-23